With Export Finance Australia’s multi-option finance facility, RJE Global secured four major contracts with Mongolia’s Oyu Tolgoi Mine.
Working in emerging markets isn’t new for South Australian specialist engineering and construction firm RJE Global (RJE). With over 20 years of operation, RJE Global now services power generation, renewables and mining sector projects across regions including New Guinea, Indonesia, Mongolia, Myanmar, Angola and Micronesia.
With their overseas work today representing 20-25 per cent of the business’ revenue, Founder and Managing Director, Robin Johnson, says their overseas work really took off a few years ago.
“We had a multi-pronged approach to our export strategy. We set up an office and an incorporated company in Mongolia a few years ago to service a potential customer. We also set up a business in Myanmar as a genuine startup, and we had ongoing global supply chain work with General Electric and other mining customers that are based overseas but being executed from Australia,” said Robin.
“About two years it really got busy and the overseas work on the back of a couple of large projects represented nearly half our revenue. It really grew over that period. We’ve maintained our relationship with General Electric and have continued to grow other export and supply chain opportunities. Our two businesses located overseas are now really starting to grow organically,” said Robin.
With a presence in Mongolia, performing work in the country using experienced Australian employees, and having developed relationships with the Mongolian Government and key organisations, RJE Global decided to grow is capability in the supply of goods and delivering major construction works for the Oyu Tolgoi underground mine project.
Oyu Tolgoi is a copper and gold mine located in the south Gobi region of Mongolia. The mine holds one of the largest known undeveloped copper-gold deposits and is expected to be the third largest copper mine in the world by 2025 when it reaches peak production.
An opportunity in Mongolia
RJE has secured four major projects for the Oyu Tolgoi mine project to date. The first was a support role for the underground development project, providing specialist electrical staff for the installation of the initial medium voltage power network executed through an international head contractor. The second was for the design, manufacture and supply of ventilation doors, private access doors and related hydraulic, electric and controls equipment to be installed in the mine. The third project is to design, manufacture and supply the fuel delivery and mobile plant lubrication systems for the underground mine.
RJE Global has recognised that to successfully deliver major construction contracts in emerging overseas locations, a blend of local and international content is essential. Through its in-country entity, RJE Mongolia, the business decided to partner with a dynamic local company who shared RJE’s passion and commitment to safety and quality.
“This partnering has allowed RJE to truly engage locally and pass on expertise to up-skill local employees and help develop Mongolia so that it can maximise the processing of its rich resources,” said Dean Cook, RJE Global Director and Chairman of RJE Mongolia LLC.
Having a country partner has provided RJE with the confidence to help secure its fourth project, a substantial on-site construction contract. This contract involves the construction of major underground infrastructure at the Oyu Tolgoi mine, a contract which is expected to have up to 100 employees on site (many of which are Australians) and span two years.
To ensure it could undertake overseas projects without adding extra pressure on business cashflow due to long payment terms, RJE Global approached Export Finance Australia. Having already secured funding from Export Finance Australia for projects in Indonesia and Micronesia, RJE knew we could provide support in emerging markets like Mongolia.
“Our previous positive experience with Export Finance Australia provided RJE with the confidence to tender and negotiate contracts which align with RJE’s expertise, skills and represent ‘core business’ but do not fit within our traditional commercial comfort zone. Their support has given us commercial robustness and confidence which has proved critical to our success overseas,” added Dean.
We were able to provide a multi-option facility for the amount of $4.3 million, comprising Performance and Warranty Bonds and an Export Contract Loan to help with the delivery costs of RJE’s first three projects in Mongolia.
“Export Finance Australia’s funding support is very important for the Oyu Tolgoi project because as a business you need to try and reduce the reliance on undertaking projects on the business balance sheet. You want to use that for more sensible and strategic purposes rather than just to fund projects,” said Robin.
“It’s certainly opened up our opportunities that’s for sure”.
“When we worked out exactly what Export Finance Australia could do for us, it changed the way we behave. Jobs that we wouldn’t have otherwise looked at now fall into projects that we can deliver, particularly a lot of the overseas work. Having the ability to get project financing is really important, it means that you can do jobs that don’t stress your whole business,” explained Robin.
“For us, the Mongolia project has a very low-risk profile as we are delivering products manufactured in Australia and local construction under the guidance of our experienced employee’s which we are very familiar with. Now with the support of Export Finance Australia, RJE can extend our reach, grow our business and pass on expertise to help this exciting developing country,” said Dean.
Emerging growth on the horizon
With the Oyu Tolgoi work expected to provide steady growth over the next six to seven years, Robin says the next venture will be expanding into the ASEAN regions including Laos, Vietnam and Cambodia.
When asked what was important for business success in emerging markets, Robin said there are three points: “Firstly, don’t spend all your money. Know your books – don’t just look at your profit and loss. Secondly, understand what support mechanisms are available; engage with your local Government. And lastly, look after your staff, customers, suppliers and in-country partners. Having trustworthy employees, suppliers and partners in the country where you are undertaking the work is essential.”